Startups instead of R&D. Why big business is changing its format

How corporations find innovative ideas

"I report directly to the CEO. We need quick solutions - this is the best approach," says Emanuele Volpe, DTEK's Chief Innovation Officer, in his office in the center of startup culture in Ukraine, UNIT.City.

Companies around the world are giving more and more freedom to their business development departments and moving away from the format of an R&D center where they work only on solving specific problems. "In this case, you lose what is happening in the world. Digitalization is everywhere now," Emanuele says.

European and American corporations rent offices for innovation-related departments in the most advanced startup centers in the region - Norway, Sweden, and Canada. "We don't want to sit in a boring big office," employees say, and the company is ready to invest in their ideas.

For example, engineers at the Cisco Innovation Center in Toronto are engaged in retail and smart city developments on the 47th floor of a business center with the best industrial landscape in the city center. There are 14 centers in the world, each with its own specialization. Tasks come both from outside the business and are born in the process.

If the project does not generate commercial interest within the company, the innovative solution is made publicly available, and it becomes accessible to everyone. They believe that the development of the innovation ecosystem is beneficial to everyone. The result is a reputation and a better position in the fight for talent.

Cisco isn't the only example. Orange Polska has been running its Orange Fab startup cooperation program for many years. Last year only, 250 projects went through it, and 15 were selected for further cooperation.

The introduction of innovative technologies in large companies is a painful issue, and everyone solves it in their own way. For example, the Chinese giant Huawei opened the Innovation & Experience Center in London in December this year to demonstrate its capabilities and work on projects using 5G technology. Despite all the actuality and hype of the technology, its business value isn't yet so obvious, and such creative centers help to attract the most progressive people to the solution.

Startups can't be approached like ordinary company projects - they require changes in business processes, top management involvement, more freedom of action and high-speed decision-making. "Four years ago, AB InBev created ZX Ventures, an organization within the organization to search for innovations for the beer business and related areas: assortment expansion, E-commerce, brand interaction, search and development of new categories, research are the areas of this corporate incubator. The company helps build businesses from scratch, buys ready-made solutions, and uses minority investments. AB InBev gives startups the opportunity to take full advantage of our global supply chain and marketing to realize their projects. It's a win-win," says Denis Khrenov, Acting General Director of AB InBev Efes Ukraine.

Startups have a contemporary attitude to failure. "We are changing our approach to business. If things go badly, we make a mistake, if they go well, DTEK benefits. At the same time, we are trying to change our attitude toward mistakes. 99% of innovations are about mistakes. Failures don't mean incompetence. We need to learn a lesson and improve the next project," says Emanuele. For example, a service for travelers that remembers where you like to sit on an airplane and checks in for you on a turnkey basis for flights of 200 airlines around the world was created "by accident" at Lufthansa's innovation hub in Germany. The team had no business objectives; they were simply looking for ways to improve the user experience during flights.

How to make corporate startups effective for business, not just for PR

1. Set goals. Maria Olin, Senior Brand Manager at Orange Polska, recommends focusing on solving real business problems that require intervention right now and narrowing the search for startups to the most relevant areas. Some companies ask for help from consulting companies before launching innovation programs to find out where the pain is.

2. Choose a format. A corporate venture fund (SAP, Google Ventures), an accelerator (PayPal, Oracle), cooperation with an existing ecosystem, or startups based on your own product (Microsoft BizSpark program) - it's up to you. Some corporations choose different formats for different tasks.

In addition to the tasks that ZX Ventures is working on, AB InBev launched a special accelerator in 2018 to find startups and solutions in the field of sustainable development - 100+ Accelerator. At the corporate level, the Radar. Tech accelerator with regular clients such as Kyivstar, MHP, Ukrsibbank, and the open innovation platform RE: ACTOR open innovation platform, which is responsible for the digital transformation of online banking for legal entities of Alfa Bank of Ukraine. According to DTEK's experience, an effective funnel for finding "its" startups in Ukraine looks like this: 182 projects at the entrance, 30 of which meet business objectives, and 10 reach the implementation stage. This year, DTEK entered the European market and received approximately 400 projects for further evaluation.

3. Involve top management and department heads. "Most startups know little about the company's business, its features and needs. Therefore, it is very important that everyone is involved in the process and shares data, including top management. My dream is for employees to move from an executive-style thinking to an entrepreneurial thinking. Here you need to get out of your comfort zone. Many people are not used to this, it scares them," Emanuele says. At first, the process may stall, but over time, people realize the value and begin to believe in the possibility of change.

4. Define success indicators. Each startup project goes through a scoring system that differs significantly from the standard procurement department evaluation system. It is important to determine how strong and experienced the team is, how well the startup meets business objectives, and whether it has potential. It is a big bonus if there is experience of cooperation with investors, which means that the project is interesting to the market.

5. Seize opportunities. It is necessary to move away from working in the style of a research center (R&D), which is focused on solving specific problems. This format narrows thinking and limits opportunities.

Iryna Manukovska

A strategic marketing and client relations advisor, known for their unwavering focus on delivering effective solutions in today's unpredictable business landscape. With 18 years of experience spanning diverse industries, including IT, FMCG, IoT, Software & Tech, Media, FMCG, and Telecommunications. Has an award for one of the best PR projects in the world at the Golden SABER Awards, specializes in the promotion of b2b services and non-standard business solutions. Forbes.com columnist, member of the Global Tech Advocates. Mother, wife, artist , mentor and coach.